30. What will venture capitalists do if our startup fails? Move on. This is telling article re: Bill Gurley, one of the best VC investors of all time: “I give Bill a lot of credit because Bill said, ‘I understand, this happens,’ Nextdoor CEO Nirav Tolia recalles. ‘most startups do fail, so the odds were that Fan base would fail, not succeed. But you have a great team, and I feel that you guys have a lot of talent. Would you be willing to take a few months to see if you could come up with another idea?’ Let’s back up. A VC fund will typically do 30-ish investments per fund and it will only start with say 1%-1.5% of the fund, on average, per investment. So, if you “fail” after the first check it’s really not the end of the world. If we have a $200m fund our job is to turn that into $600m (3x). If we invest $2m into your start- up and it fails, that’s a bummer but not the end of the world. It’s not really going to materially impact if we turn $200m into $600m. It’s just one “at bat” that didn’t pan out. It’s OK as long as a bunch of the others do pan out. We will make $598m gross instead of $600m after the $2m loss on your start-up. But as the loss approaches 10% of the fund size — here $20m in this scenario — it starts to create a lot of stress. Typically, though, that’s over 3–4 rounds of investment. You get a chance to decide whether to play another card here, or not. So losing the “first check”? Most VCs will be bummed, shrug but writing off a third- check investment? A VC could lose their job there. SAASTR.COM 28